The heads of two large life insurers said today that their companies are resisting pressure to take much more interest rate or credit rate risk to boost investment yields.
Roger Crandall, chief executive officer of MassMutual, and Ted Mathas, CEO of New York Life, talked about their companies’ cautious search for yield at a CEO panel at an insurance industry conference organized by Standard & Poor’s. Economists at an earlier conference session speculated about when rates might move higher.
Low rates on the investment-grade bonds and other highly regarded assets that dominate life insurers’ portfolios have hurt the insurers’ ability to generate the income needed to support products with long-term guarantees, such as long-term care insurance, long-term disability insurance and annuities with minimum benefits guarantees.
Some insurers and asset managers say insurers need to consider alternative investment ideas.
MassMutual is reluctant to invest in fixed-income investments that generate higher returns today but are more sensitive to shifts in rates, Crandall said. ”Betting on interest rates is a fool’s game,” the executive said.
Crandall and Mathas said their companies are also reluctant to shift toward buying more high-yielding, low-rated investments. The companies are trying to get better results without gambling in interest rates or borrower solvency by investing portfolio assets in deals that involve liquidity risk, or the need to lock money away for a specified period of time, the executives said.